Daily Archives: February 22, 2010

That other real estate market came back into the spotlight today as Chris Dodd, chairman of the Senate Banking Committee sent letters to a number of regulators, including the Federal Reserve, asking them to report on their efforts to stabilise the commercial real estate market.

By any realistic estimate, CRE has yet to finish wreaking havoc on the economy. Nearly half of CRE loans are currently “underwater” and the largest loan losses haven’t yet occurred, according to the Congressional Oversight Panel. Read more

There’s no news, per se, but it’s worth remembering what banks said would happen if they were prevented from raising interest rates based on a number of now prohibited factors, including changes in consumers’ credit scores, their behaviour with other companies, approaching credit limits, and making minimum payments.

Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, today spoke of an ‘impressive’ turn-around in GDP and said that the tide of dismal economic news ‘appears to have turned.’ But there the upbeat message of the a leading dove ended.

The annual 5.7 per cent growth in fourth quarter GDP was unlikely to be sustained, she argued.

Unfortunately, I’m not at all convinced that a V-shaped recovery is in the cards. That fourth-quarter leap in GDP overstates the underlying momentum of the recovery.

The reason for her scepticism in the sustainability of last quarter’s growth was, of course, the same as everyone else’s: most of it was due to a slowdown Read more

Dubai World is unlikely to pay off developer Nakheel’s $980m Islamic bond, a source familiar with the matter told Reuters on Monday, and all options are open. The issue is due on May 13. “It is very unlikely that the bond will be paid off,” said the source. “Incredibly unlikely.” Dubai World is currently in talks to restructure about $22bn in debt and is due to present a proposal in March.

The Israeli central bank has chosen to keep its benchmark interest rate on hold at 1.25 per cent. The decision was widely expected, though some predicted a small cut in rates. Inflation in the country is falling faster than expected, with CPI down 0.7 per cent in January, versus expectations of 0.3 – 0.5 per cent. Israeli economic activity has risen, although fixed investment has dropped significantly. Internationally, “there remains the risk of another recession, whose probability may even have increased.”

The Greek finance ministry failed to deliver currency swap information to the European Commission by the deadline, last Friday. When asked, EC spokesman Amadeu Altafaj Tardio told MarketNews: “Eurostat has received some information but not all relevant information from the Greek authorities.” He added: “Athens told us that the reason for the delay was partly to do with the 4-day strike at the finance ministry.”

The Hungarian central bank governor has cut the base rate from 6 to 5.75 per cent, effective today. The move was expected, and a further cut is seen as likely before easing stops. Rates were last cut 25bp on January 25.

Sweden’s financial regulator needs a bigger budget to cope with its expanding role. The Financial Supervisory Authority is seeking a 10 per cent budget increase per year for three years, on top of its 300m krona ($41m) budget, director-general Martin Andersson told Bloomberg.

Sweden’s banks, which are expected to lose $3.7bn this year from operations in the Baltic countries, might also be facing a housing bubble at home. Record low interest rates have increased mortgage arrangements in spite of rising unemployment. House prices rose 5 per cent in the last quarter, having already passed pre-crisis peaks. Read more

The Irish government has today received a 15.73 per cent direct stake in Bank of Ireland, in addition to 25 per cent held indirectly through warrants and preference shares. The 200m ordinary shares were given in lieu of a €250m payment that was due by the bank.

Analysts had doubted the stock transfer would take place. It could have been waived by agreement at a special shareholder meeting, but such a meeting could not be organised in time for the payment deadline today. Finance Minister Brian Lenihan said in a statement he welcomed the stake, saying: “This ensures that taxpayers are remunerated in a timely fashion for their investment in the bank.” Read more

This from Patrick Honohan, Ireland’s central bank governor, in an advance copy of a speech he will give today to the British-Irish Parliamentary Assembly, seen by Reuters. “Achieving lower nominal wage rates is not easy. But it is undoubtedly an essential component of a pro-employment recovery strategy for Ireland.” Read more

The central bank of Jordan has cut its discount rate to 4.25 per cent and repo rate to 4 per cent. Overnight rates on the dinar will fall to 2 per cent. The cuts were effective yesterday. Jordan’s economic growth halved last year to about 3 per cent, and the cuts are intended to boost demand. (from Reuters)

Growth in Malaysia looks likely to have outperformed expectations in Q4 and the central bank governor has hinted at a rate rise.

Central bank governor Zeti Akhtar Aziz told Reuters: “We are already clearly on the path of economic recovery. We are no longer in extraordinary circumstances. We have come out of that kind of environment.” She underlined that any adjustment would be a normalisation and not a tightening, saying: “Our policy will continue to be accommodative of economic growth.” Read more

The European Central Bank has turned curiously quiet. I have had the impression for a few weeks that Jean-Claude Trichet, president, and other members of the six-man executive board, were appearing in public less often. Now, I have done the sums, and I was right.

Since the beginning of December, and including those scheduled for this week, their speeches have numbered fewer than in any three month period since the global financial crisis first erupted in mid-2007. (I excluded last August, a dead month for policymakers.) Since the beginning of this year, Mr Trichet has made only one full-scale address, according to the list kept on the ECB’s website. That was at the 50th anniversary this month of the Reserve Bank of Australia in Sydney, when his remarks were overshadowed by his decision to return early to join eurozone leaders in talks on the Greek crisis. In the first two months of last year, Mr Trichet gave at least nine speeches.

The Money Supply team

Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS

Claire Jones is the FT's Eurozone economy correspondent, based in Frankfurt. Prior to this, she was an economics reporter in London. Before joining the Financial Times, she was the editor of the Central Banking journal. Claire studied philosophy and economics at the London School of Economics. RSS

Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS

Sarah O’Connor is the FT’s economics correspondent in London. Before that, she was a Lex writer, covered the US economy from Washington and the Icelandic banking collapse from Reykjavik. Sarah studied Social and Political Sciences at Cambridge University and joined the FT in 2007. RSS

Ferdinando Giugliano is the FT's global economy news editor, based in London. Ferdinando holds a doctorate in economics from Oxford University, where he was also a lecturer, and has worked as a consultant for the Bank of Italy, the Economist Intelligence Unit and Oxera. He joined the FT in 2011 as a leader writer. RSS

Emily Cadman is an economics reporter at the FT, based in London. Prior to this, she worked as a data journalist and was head of interactive news at the Financial Times. She joined the FT in 2010, after working as a web editor at a variety of news organisations.
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Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS

Ben McLannahan covers markets and economics for the FT from Tokyo, and before that he wrote Lex notes from London and Hong Kong. He studied English at Cambridge University and joined the FT in 2007, after stints at the Economist Group and Institutional Investor. RSS